HC Deb 07 December 1972 vol 847 cc1744-52

Question again proposed.

Mr. Higgins

To return to the points raised by the hon. Member for West Lothian, he asked what lessons had been learned from the experience at Ninewells and he related his question to a hospital which is to be built. I think there are several major issues connected with the construction of the new Ninewells Hospital and the new medical school at Dundee, which are in arbitration between the Eastern Regional Hospital Board and the contractors. As was indicated in the Treasury Minute of 8th November, 1967, in paragraphs 107 to 112 of the Fifth Report of the Public Accounts Committee 1966–1967, the form of building contract used in Ninewells demands the closest co-operation between the contractor and the design team, and the need to ensure effective collaboration in such circumstances has been generally noted.

But the Ninewells experience also suggests that careful consideration should be given to the phasing of large building projects. Livingston Hospital will be built in phases, but the difficulties experienced at Ninewells may be less relevant to this project than would the experience gained in the construction of comparable district general hospitals in Scotland and elsewhere in the United Kingdom. Obviously, one would take into account the broad experience but one probably needs to check it rather more widely than the hon. Member suggested.

Mr. Dalyell

This is, I think, rather a soothing answer, though I do not blame the Financial Secretary. The fact is that after all that has been said this afternoon about how effective the Public Accounts Committee is, this was raised for the first time nearly six years ago and still the position is more or less as bad as ever. The time has come for a hard look at what has happened. The relationship between the contractors and the design team must concern anybody who is concerned with public money.

Mr. Higgins

I understand what the hon. Gentleman says, but I cannot go any further than I have gone on this occasion. I have taken a careful note of what he has said, but I am sure that he will appreciate that when an arbitration is going on it presents certain difficulties.

The hon. Gentleman raised a final point which somewhat puzzled my right hon. Friend the Secretary of State for Scotland. He referred to a report in the Scotsman of 25th November. I understand that there have already been official denials of the story from the Atomic Energy Authority and it has been made quite clear by my hon. Friend the Minister for Industry that there is no truth in the report that Dounreay is an utter failure—I believe those were the words in the report—or that it will be closed within three years. The construction of the 250 megawatt fast reactor has been commenced and it will be commissioned next year. There is general agreement between the generating boards and the Atomic Energy Authority, and in three or four years the stage will have been reached where a decision to order the first commercial fast reactor should be possible. There will be a continuing programme of work at Dounreay for many years. I understand that this has already been put on the record and I was slightly puzzled why the hon. Member should feel it necessary to raise this point on this occasion. My understanding is that the point had already been covered and that, indeed, Press reports had made the position clear.

Mr. Dalyell

It was necessary to put it on the record, as I said, because, as in so many cases, once mud is thrown it sticks on a project. The fact is that in the foreign Press the original report was rather widely quoted, but the denials, as far as I can see, were relatively unquoted. This may have been because of the news of the day, but I thought it was important that the Government should put on record precisely what is the situation about the reactor.

Mr. Higgins

Again, I understand what the hon. Member says. I must say that I do not think it is a unique experience, nor, alas, is it one which the Public Accounts Committee or myself will easily rectify.

I think I am right in saying that those are the points which the hon. Member for West Lothian raised, and I should like now to say a word or two about a matter raised by the right hon. Member for Birkenhead and on which comments were made also by my hon. Friend the Member for Mid-Bedfordshire (Mr. Hastings), and that is the question of the Sugar Board.

I do not think there is much I can add at this stage to the information already before the House in the shape of the Treasury Minute. Transferring of raw sugar from rural beet factories to refineries at the ports is less economic than refining the sugar as a continuous process. This is not in dispute, but the issue cannot be tackled in isolation, as the Committee recognised. Total supplies are set by the needs to refine sugar. More refined sugar from beet factories must lower output at the port refineries, with consequent surplus capacity and loss of efficiency.

I think that probably the right hon. Gentleman and I are familiar, in broad economic terms, with what the problems are here. I am speaking of particular technical and economic problems.

My hon. Friend the Member for Mid-Bedfordshire referred to the use of the expression "efficient" or "efficiency" in the Treasury Minute. Of course, there is a number of variable factors here. The word "efficient" covers a number of different economic concepts. It may be in terms of costs of one plant against those of another in a particular location working at a particular capacity, or it may be a question of how costs vary as between the use of plants at different levels of capacity. These are familiar problems of economics and location theory. The position is that the Committee looked at it; it has been brought very carefully to our attention.

I have taken note, as my right hon. Friend the Minister of Agriculture will have taken note, of what my hon. Friend the Member for Mid-Bedfordshire said. The House will appreciate that as my right hon. Friend the Minister of Agriculture hopes to be able to make an announcement about our consultations in due course, I ought not to be expected to say more than I have already said at this moment, but we shall certainly very much bear in mind the points which the Committee of Public Accounts made in its Report. Obviously the question of ensuring that the job is done as efficiently as possible is one which will be in the forefront of our minds.

I come to another point raised by the right hon. Member for Birkenhead. It was also mentioned, I recollect, by the hon. Member for West Lothian. I am sorry that I did not cover it in my earlier round up of the points the hon. Member made, but I think he mentioned it as part of the more general debate. I do not wish to quarrel with anything in this report on the circumstances surrounding the original decision that the Government should contribute to the launching costs of the RB211 and the unhappy events leading up to the appointment of the receiver at Rolls-Royce in February, 1971. These events have been set out in the Government's White Paper on Rolls-Royce Ltd. and on the RB211 aeroengine—Cmnd. 4860. The Government accept the main recommendations of the Committee. They broadly endorse the existing policy.

As a general rule the Government are concerned that any aerospace company receiving launching aid must carry the primary responsibility for the technical and commercial success of the project and accordingly bear the cost of any technical difficulties. It is, therefore, important to ensure before giving launching aid that the company has the necessary financial strength to carry these risks. There may be particular cases which deserve particular and specific analysis and where the exact provision will need to be related to the circumstances to ensure that sufficient incentive is retained to encourage the company towards efficiency and profitability.

My hon. Friend the Member for Hove (Mr. Maddan) raised a number of points on this and the broader question of Government participation in whole or in part in companies. This has been a matter of great concern to the PAC now for several years. I shall return to that point in my concluding remarks.

What I would like first to do is to take up one or two of the points which were raised about the shipbuilding industry. The Committee spent a considerable time in examining the Department of Trade and Industry on the financial assistance given to shipbuilding, both by the Shipbuilding Industry Board and by the Government. It paid particular attention to the assistance given to Upper Clyde Shipbuilders, Harland and Wolff and Cammell Laird. From this examination I think it true that the committee distilled two main lessons, that further assistance should be directed more effectively towards establishing a viable shipbuilding industry and should not be provided solely to meet losses, and that there should be adequate monitoring by the Government of the performance and prospects of companies receiving Government assistance These are obviously very important points.

The hon. Member for East Stirlingshire (Mr. Douglas) raised a number of points on the shipbuilding industry. I think I would be fair to him if I said to him that they seemed to me to be points of policy rather than of administration, although he has been concerned with looking at actual administration. In this debate we are not concerned with policy but with the report of the Committee.

Mr. Douglas

I wonder where one ends and the other begins. I was concerned, as I think the Minister will accept, to indicate how we could have a viable industry by going for a market which is proven.

Mr. Higgins

I agree that there is some problem in deciding where policy ends and administration begins, but my impression is that this was not a line which the Committee itself had trouble in drawing, and it is not one which on many occasions this House has trouble in drawing. I would not suggest that what the hon. Member said was out of order; it would be most unfair of me to do that. All I am saying is that if I were to try to answer the questions he raised I might be out of order.

I want to take up one point to which he referred, the question of the losses and the question of monitoring a company's performance. Very large sums of assistance were given to UCS and Harland and Wolff both by the SIB and directly by the Government but, as, I think, the hon. and learned Member for Northampton (Mr. Paget) pointed out, there were considerations of employment as well as the narrower question, and this is something to which the Treasury Minute refers as well. It would be a mistake to overlook the fact that most of the SIB assistance to the industry went towards the costs of reorganisation and of capital expenditure on new facilities, including modern shipyard facilities at Harland and Wolff. Such assistance was clearly directed to improving the industry's competitive position, and many of the new facilities are already showing their effect in increased efficiency. The SIB also helped the industry, as the Committee recognises, to sustain a competitive rôle by promoting improvements in management and financial control and encouraging greater collaboration from the work force.

These are very broad issues. What we have done meanwhile is to introduce a scheme of temporary financial assistance to the industry to safeguard employment and to provide a period of stability. As the House will know, shipbuilders are eligible for the full range of assistance under the Industry Act, and the Government are prepared to use their powers to give selective assistance to encourage closer collaboration between shipowners and shipbuilders, to assist modernisation of United Kingdom shipyards, and to improve efficiency in both industries.

The other thing is that I would assure the House that the Government will do all that they can to make certain that there is adequate appraisal of applications for such assistance and adequate monitoring of the firms which receive it. The ability of the Department of Trade and Industry—this is touching a little on the question of technical officers raised by the hon. Member for West Lothian—to carry out such appraisal and monitoring has been strengthened by the formation of the Industrial Development Unit, whose staff has been drawn from the City and from industry, and will have practical, financial and commercial skills. My right hon. Friend the then Secretary of State for Trade and Industry referred to this on 22nd March, at col. 1547 of HANSARD.

This is an area where it is difficult to recruit the right people, and we are doing all we can to ensure that those who are needed to monitor projects such as this are available and can do the kind of job which the PAC is anxious to do.

I shall not go into details, because the House is well aware of the recent developments on the Upper Clyde with regard to Govan Shipbuilders and the Marathon Shipbuilding Company. But the Government have, in addition to that, agreed to provide assistance for major modernisation schemes with Harland and Wolff and Cammell Laird, and both these projects are going ahead. The provision of the new facilities will result in specific improvements in productivity, and again we shall monitor the performance as carefully as we can.

I want finally to turn to the points raised by a number of hon. Members, among them the hon. and learned Member for Northampton and my hon. Friend the Member for Hove. My hon. Friend the Member for Hove put his finger on the expression which points the real dilemma we face here. He used the expression, "If we are in for a penny, are we in for a £?". He went on to say why there are some circumstances in which one can go in for a certain amount and then stop. What I think is now generally recognised is that it is important that the precise position should be made clear. My right hon. Friend referred to Beagle Aircraft. As he knows, Beagle Aircraft was operating at a particular airport close to both his constituency and mine, and that particular event was one about which the Public Accounts Committee has been concerned.

But on the surveillance of firms covered in paragraphs 98–99 of the Third Report from the Public Accounts Committee the Committee makes various statements, and we accept what it says about the need to secure a sufficient flow of information without diminishing the responsibilities of directors or management, and without being unduly inhibited by Section 332 of the Companies Act 1948. This was a point to which the Public Accounts Committee paid considerable attention.

The House will agree that the objectives must be, first, to ensure that public funds are used for the purposes for which they have been made available; secondly, to assist the success of the objectives for which the funds were supplied; and thirdly, to limit the call on public funds to achieve that purpose.

Measures are being taken to strengthen further the Government's expertise in these matters and to enable the Government to be in a position to call for appropriate necessary information to secure these objectives. But it will not be easy to achieve the objective of having sufficient information upon a company's affairs without some risk of appearing to take over responsibility for its conduct and liability for the consequences of the management or the directors. This has been recognised throughout the debate today and has been a recurring theme throughout our discussions. Naturally the problem varies according to the nature of the Government's stake and the nature of the company concerned. But it is important, as far as one is able, to hit the right balance in each individual case.

This is a tremendously difficult matter. The right hon. Member for Birkenhead recognises this from his previous experience as a Minister. It is tremendously difficult to judge. That being so, we obviously do not want to avoid this difficulty—indeed, I do not believe that it can be avoided—or the difficulties which might flow from Section 332 of the Companies Act by putting our heads in the sand and just not wanting to know what is going on.

We would intend to obtain whatever information we judge necessary to achieve the objectives I have mentioned. We also feel that although clearly we must take into account Section 332 of the Companies Act, it need not necessarily inhibit the Government from providing or considering the provision of assistance in the first place; though the question of making sure the position is clear is one which is of great importance and one of the lessons we can learn from the experience of the past. It is one to which the Public Accounts Committee has particularly brought the attention of the Government and the House.

This is a difficult area of law and one cannot lay down simple, hard and fast rules on which to operate. One needs to look at the individual cases, to take into account the various experiences which we have had and to draw lessons from them.

On that note, which I think is very consistent with both the line taken by the right hon. Member for Manchester, Cheetham and, indeed, the theme taken up by the right hon. Member for Birkenhead in opening the debate, it would be appropriate for me to conclude.

The debate will be generally recognised to have been a very wide-ranging debate indeed, and one which has raised problems which are of great difficulty and for which we must seek to find solutions. The analysis of these problems has been carried out, both in detailed questions and in seeking to draw from general lessons, by the Public Accounts Committee. I am sure that the House is grateful to all those hon. Members who have served on it with such diligence and such skill.

Question put and agreed to.

Resolved, That this House takes note of the First, Second and Third Reports from the Committee of Public Accounts in the last Session of Parliament and of the Treasury Minute on those Reports (Command Paper No. 5126).